Surprising lawmaker response to small business tax relief effort

Posted on Posted in Employee Benefits, Small Business, Taxes

Today a representative from the Washington DC office of the National Federation of Independent Businesses met with a staff member at NJ Senator Menendez’ office in a last minute attempt to gain support for small business tax relief from the Affordable Care Act. See yesterday’s blog post for background on this story.

Up to 100,000 small businesses will be saddled with a new excise tax penalty that could exceed $18,000 per employee for failure to modify their 2015 health plans or reimbursement arrangements to meet the requirements of the Affordable Care Act. My communications with accountants indicates that most advisers have not warned their clients of the steep new tax. The tax penalties were avoidable if action were taken earlier in the year but now it it too late to avoid the excise taxes. I covered that aspect in this article titled “Avoidable small business taxes in 2015“.

Unfortunately the Senator’s office was not sympathetic to the plea. Comments related to me were:

“businesses should offer health insurance because it’s the right thing to do.”

“the relief bill only helps businesses with tax breaks as the employee would be adequate with advanced premium tax credits exclusively.”

I am surprised by the staffer’s thinking but not be the outcome. The fact is that many accountants and business owners are not aware of the tax trap set for them simply becasue they tried to help employees with the high cost of health care.

There are two types of businesses who are subject to the steep new tax:

  1. businesses that reimburse uninsured medical expenses outside of an integrated group insurance plan (and only for employees on the group insurance).
  2. Businesses that reimburse part of the cost of individual health insurance.

Separately, businesses are required to report the cost of the first type of health plan on the employees’ W2 forms this year. Failure to do so triggers even more penalties.

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